Boston, MA 08/13/2014 (wallstreetpr) – Investment advisor Goldman Sachs Group Inc (NYSE:GS) has once again resorted to cut its price objective on the shares of medical technology company Volcano Corporation (NYSE:VOLC). This is the second time the brokerage had reduced its price tag within a gap of 3-4 days. The latest move comes on the heels of the company holding a meeting with the analysts’ on August 11.
Price Target
Goldman Sachs Group Inc (NYSE:GS) had slashed its price target on August 8 to $18 from $20 after the company had announced its quarterly results for the second quarter. Now, on Tuesday, the brokerage had again cut its price objective to $15 from $18, which meant a 25% reduction from $20 and 16.7% reduction in the latest price target revision on Volcano shares. However, based on the price of around $12.12, the revised price tag provides an upside reward of around 23.5%.
Analyst David Roman said that his price target was based on reduced estimates and target multiple derived after weighing estimated sales for 2015, discounted cash flow and M&A.
Analyst Meeting
David Roman said that when he came out of the analyst meeting on August 11, he was intrigued by the missed opportunities to improve Volcano’s top line growth, i.e. peripheral vascular franchise, and move into therapeutic devices. However, he said that the management’s tone was refreshing in acknowledging the challenges ahead of it.
The brokerage said that the valuation is hard to be ignored at the current levels. It also said that it hesitates on two major points, one is on the execution, particularly on Long-Range Plan or LRP, as the investment advisor was looking for traction in view of the uneven pattern of results, i.e. of the last ten quarters, Volcano had missed it in eight quarters. And the other is that Goldman Sachs Group Inc (NYSE:GS) wants to see the Street analysts’ numbers adjust downwards before calling for a reset.
Therefore, the brokerage had maintained its rating of Neutral on the shares of Volcano.
Long-Range Plan
During the meeting with the analysts, Volcano said that it was aiming to achieve sales uptick of 6% – 8% on compound annual growth rate or CAGR during the periods between 2014 and 2018. Goldman Sachs Group Inc (NYSE:GS) believes that the Street’s numbers are likely high with short-term revenue uptick being below the LRP, and the acceleration is expected in the outer years.
The brokerage cited new product adoption rates; pricing pressures; and competitive dynamics as the risk factors.
